Yes Bank, Federal first off the block to start business at Gift

MUMBAI: Fast-growing Yes Bank and the old private sector Federal Bank have been the first ones off the block to hit Gujarat International Finance Tech-City (Gift) and are hoping to make the most of easy regulations, low operational costs and the opportunity to raise dollar-denominated funds.

In the six months to April, Yes Bank has raised and lent $225 million of foreign currency loans to foreign subsidiaries of Indian companies and their joint ventures abroad and expects to more than double it in the full fiscal year ending March 2017, said Jaideep Iyer, group president, financial management, Yes Bank.

"For banks like us which do not have a foreign branch, it makes sense to build this business rather than for large banks which have foreign branches and can always raise resources abroad," Iyer said.Income generated from these branches is tax-free as this is a special economic zone which is an added incentive.

Ashutosh Khajuria, executive director at Federal Bank, one of three banks which have begun operations in Gift along with Yes Bank and ICICI Bank, said this special zone is a bigger opportunity for his bank than large lenders like ICICI Bank.

"We alone have done a business of $40 million so far. It makes immense sense for us because it allows us raise overseas funds to lend as external commercial borrowings which we couldn't do so far," Khajuria said.

ICICI Bank did not respond to an email seeking comments on its operations in Gift. Banks need a minimum of $20 million to start operations in Gift, but can raise funds in any cur rency and lend them abroad.

Domestic regula tory require ments such as CRR, SLR & prio rity sector lending requirements also don't apply . A bank is allowed to open one branch each with balance sheet in foreign currency . Further in January , RBI eased regulations and allowed banks in Gift to open foreign currency current accounts for companies and non-resident Indians (NRIs) changing an earlier policy that did not allow for any savings or current accounts in this centre.

Public sector State Bank of India (SBI) and IDBI Bank, which have overseas branches, will also launch their business in May, attracted by cheaper than costs compared with their business abroad.

Yes Bank